A new sustainable investment platform, founded by four leading global pension funds, has revealed that issuers in Asia are pursuing accreditation more swiftly than those from any other region.
“Among the issuers that reach out to us, the majority are Asian,” said Hans Op’t Veld, chair of the markets and members committee of the Sustainable Development Investment Asset Owner Platform (SDI AOP).
The SDI AOP was founded by AustralianSuper, PGGM, APG and Canada’s British Columbia Investment Management Corporation (BCI) in 2020, to develop a new taxonomy for sustainable investment based on the UN Sustainable Development Goals (SDG).
Investor members’ total AUM is $1.468 trillion, with investment manager members, which include BlackRock, UBS Investment Management and Bridgewater, collectively comprising an additional $11.5 trillion of AUM.
In addition to his role on the SDI AOP, Op’t Veld is principal director for responsible investments at PGGM Investments, which manages the €162 billion ($183 billion) Dutch pension fund.
The platform eschews self-reporting in favour of independent analysis of company accounts, using AI and human analysis to provide data on how far products and services contribute to the UN’s SDGs. The analyses also log negative contributions that block the SDGs.
ASIAN ISSUERS SEE OPPORTUNITY
The SDI AOP, tracks 9,258 companies that contribute to the UN SDGs with what they make or the services they provde. For 1,275 of these, more than half of their products or services contribute to SDGs.
The SDI APO revealed exclusively to AsianInvestor that Asia accounted for 381 of the 1,275 companies.
“Companies [in Asia] know there are opportunities [to advance the SDGs] in emerging markets that are less present in developed markets,” said Op’t Veld.
He added that, while reporting standards around ESG in developed markets are higher, emerging market issuers view platforms like SDI AOP as a way to catch up, thereby unlocking significant capital flows from developed and emerging market investors.
Op’t Veld said that Asian issuers were positioned to benefit from significant future flows from global investors, including those in Asia, because of the high demand for private capital to fund the transition of these economies to more sustainable business practices. Also, as a result of the growing ubiquity of Asian companies in global supply chains, issuer firms are set to face increased scrutiny from investors, regulators and the public.
AUSTRALIAN INVESTORS LEAD
Op’t Veld, who was previously PGGM’s head of responsible investment, said the platform had achieved critical mass in Australia, where super fund members include HESTA as well as AustralianSuper. He noted that investor engagement elsewhere in Asia had been slow.
“That level of engagement is not the same in South Korea and Japan, where asset owners are still finding their way,” he said.
Op’t Veld said that the principal obstacle to wider adoption in the Asia was the different ways in which Asia’s sovereign wealth and other funds are required to report to their stakeholders, as compared with Europe and in Australasia.
“Currently, they are behind the curve since there is not the reporting need from the stakeholder point of view: the obstacle is that the institutional environment is different,” he said.
But he predicted that engagement in China, India, Indonesia and Malaysia would increase.
ASIAN INVESTOR RESOURCE
Op’t Veld said the SDI AOP provides an invaluable opportunity for smaller asset owners across Asia who may not have resources at their disposal to collect granular data on the ESG credentials of prospective investments, and who would therefore benefit from the data provided by the AOP, which is now expanding its coverage across fixed income markets, in addition to equities, and aims soon to include private assets in its universe.
“We are keen to share best practices, illustrating how [members] have integrated the taxonomy into policies and investment decision-making, as well as providing investors with data that allows them to deliver on their [ESG] targets, across active, passive, internal and external mandates,” he said.